Tuesday, May 15, 2007

Mind-Blowing Mortgages

Yikes! Would you like an all-too-clear view of how much even our "good" debt costs us? I was playing around with this mortgage payoff calculator online today. Seriously, check it out!
I plugged in these numbers:
$150,000 house
30-year mortgage
6.38% interest rate
In thirty years, this $150,000 house will have cost a whopping $337,063. Paying just an extra $50 a month will save $29,548 over the life of the loan.

4 Comments:

Megan said...

That's what keeps the banks in business!! At least the interest is tax deductible. And that $50/month can go even farther if you invest for your retirement at a higher rate of return than the 6% you pay on your mortgage.

True dat! The difference, for we risk-averse, is the peace of mind that comes with knowing that even if the stock market crashes and the automotive industry crumbles (that may be a when rather than an if:), we won't end up on the street or depending on others' generosity. Have you ever seen Cinderella Man?

Mike and I are loosely following the Dave Ramsey plan, which consists of the following "baby steps" (which I'm quoting pretty much verbatim):1- $1,000 to start an Emergency Fund2- Pay off all debt using the Debt Snowball (pay off each debt in turn and add the payment from the paid-off debt to the next payment)3- Three to six months of expenses in savings4- Invest 15% of household income into Roth IRAs and pre-tax retirement5- College funding for children6- Pay off home early7- Build wealth and give!

I say we're "loosely" following it because while we're charging away at step two, we're also dabbling in steps three and four right now. For me, that calculator was kind of a heads-up. Now that we have almost everything but the house paid off, it's tempting to rest on our laurels a little bit. Realizing that mortgage debt isn't free, either, is added incentive to get on to step six.

About Me

On top of being a wife and full-contact parent to three young children, I am an advocate for livable communities and alternative transportation. That means working for communities that work for every member of the community, including those who are either unable or unwilling to drive. It's all about making our communities stronger.